Question

Question 6

Hansen Corporation uses the perpetual inventory system and had the following information available:

Units              Unit Cost                 Total Cost

Jan	1	Beginning inventory	15	$4.00	$ 60
	20	Purchase	60	4.40	264
	21	Sale	65	-	-
Jul	25	Purchase	30	4.20	126
Oct	20	Purchase	45	4.80	216
Nov	15	Sale	75	-	-

Instructions

Answer the following independent questions and show calculations supporting your answers:

a) Assume that the company uses the FIFO cost method. The cost of goods sold for the Jan 21 sale was $ ________

b) Assume that the company uses the average cost method. The cost of goods sold for the Jan 21 sale was $ _____________ (Use unrounded numbers in your calculations but round to the nearest cent for presentation purposes in your answer.)

c) Assume that the company uses the average cost method. The value of the inventory after the Nov 15 sale was $    _________________ . (Use unrounded numbers in your calculations but round to the nearest cent for presentation purposes in your answer.)

  d) Assume that the company uses the FIFO cost method. The value of the inventory after the Oct 20 purchase is $_____________ .

Answer 1

a) COGS for the Jan 21 Sale (FIFO) = 15 units * $4 + 50 units * $4.40 = $280

b) COGS for the Jan 21 sale (Average Cost ) = Cost of units /No. of Units = (264+60)/75 = $4.32

$4.32*65 = $280.80

c) Cost of Inventroy after Nov 15 Sale ( Average cost ) = Number of Units left * Average Cost

(15+60-65+30+45-75) * 4.80 = $48

d) Value of Inventory after Oct 20 Purchase ( FIFO) =

Number of units left from Jan 20 lot after sale of Jan 21 = 10 units . Therefore Cost of these 10 units = 10*4.4 = $ 44

Cost of units from 25 july lot = 30*4.2 =$ 126

Cost of units from 20 oct lot = 45*4.8 = $ 216

Total Cost = 44+126+216 = $ 386